$1.$ You are the audit senior of Blair & Co and your team has just completed the interim audit of Chuck Industries Sdn Bhd whose year$-$end is $31$ January $2023.$ You are in the process of reviewing the systems testing completed on the payroll cycle, as well as preparing the audit programmes for the final audit.

Chuck Industries manufactures lights and the manufacturing process is predominantly automated; however, there is a workforce of $85$ employees who monitor the machines, as well as approximately $50$ employees who work in sales and administration. The company manufactures $24$ hours a day, $7$ days a week. The payroll system operates as follows.

$$ Factory workforce

The company operates three shifts every day with employees working eight hours each. They are required to clock in and out using an employee swipe card, which identifies the employee number and links into the hours worked report produced by the computerised payroll system. Employees are paid on an hourly basis for each hour worked. There is no monitoring$/$supervision of the clocking in$/$out process.

$$ Wages to be paid to the workforce.

On a weekly basis, the payroll department calculates the wages. This is calculated based on the hours worked report multiplied by the hourly wage rate, with appropriate tax deductions. These calculations are not checked by anyone as they are generated by the payroll system. During the year the hourly wage was increased by the human resources $($HR$)$ department and this was notified to the payroll department verbally.

Each Friday, the payroll department prepares the pay packets and physically hands these out to the workforce, who operate the morning and late afternoon shifts, upon production of

identification. The pay packets for night shift workers are given to the factory supervisor to

distribute. If any night shift employees are absent on pay day then the factory supervisor keeps these wages and returns them to the payroll department on Monday.

$$ Sales and administration staff

The sales and administration staff are paid monthly by bank transfer. Employee numbers do fluctuate and during July two administration staff joined; however, due to staff holidays in the HR department, they delayed informing the payroll department, resulting in incorrect salaries being paid out.

Required

Identify and explain FIVE DEFICIENCIES of Chuck Industries Co's payroll system and provide

a recommendation to address each of these deficiencies. $[50$ marks$]$